Heller, Yuval (2009): Justifiable choice.
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Abstract
In many situations a decision maker has incomplete psychological preferences, and the weak axiom of revealed preference (WARP) is often violated. In this paper we relax WARP, and replace it with convex axiom of revealed noninferiority (CARNI). An alternative x is revealed inferior to y if x is never chosen when y is in the convex hull of the choice set. CARNI requires that an alternative is chosen if it is not inferior to all other alternatives in the convex hull of the choice set. We apply CARNI in two models and axiomatize nonbinary choice correspondences. In the first model we impose the standard axioms of expected utility model, except that WARP is replaced by CARNI. We prove that it has a multipleutility representation: There is a unique convex set of vNM utilities, such that an alternative is chosen if and only if it is best with respect to one of the utilities in this set. In the second model we impose the axioms of the subjective expected utility, relax WARP in a similar way, and get multipleprior representation: There is a unique convex set of priors over the state of nature, such that an alternative is chosen if and only if it is best with respect to one of these priors. Both representations are closelyrelated to psychological insights of justifiable choice: The decision maker has several ways to evaluate acts, each with a different justification. Observable payoffirrelevant information during the choice triggers her to use a specific “anchoring” justification for the evaluation of the alternatives.
Item Type:  MPRA Paper 

Original Title:  Justifiable choice 
Language:  English 
Keywords:  uncertainty, multiple priors, multiple utilities, incomplete preferences, anchoring, framing, nonbinary choice. 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty 
Item ID:  15645 
Depositing User:  Yuval Heller 
Date Deposited:  11. Aug 2009 05:42 
Last Modified:  25. Feb 2013 09:56 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/15645 
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